FSCS announces latest 2021/22 levy of £717m
Financial Services Compensation Scheme (FSCS) also provides early indication of 2022/23 levy
FSCS today publishes its latest Outlook, which confirms its total levy forecast for 2021/22. It also provides an early indication of the 2022/23 levy.
The total levy for the 2021/22 financial year is now £717m, which is lower than the £833m levy announced at the last forecast in May. The previous £833m figure included £116m for the retail pool, which is a separate pot that FCA funding classes contribute to if they have not reached their maximum limit, and another class has exceeded its own.
FSCS now no longer needs to invoice the retail pool. The main reason for this is that failures that were expected in 2021/22 have not yet happened and are now more likely to occur in 2022/23 and beyond. FSCS can also confirm that it will not be calling for a supplementary levy this financial year. In previous years, FSCS has called for a supplementary levy when funds are needed to cover any additional compensation costs since the original forecast levy.
To help prepare the industry for the year ahead, in this Outlook update, FSCS is publishing its first levy forecast for 2022/23 of £900m. This figure includes an approximate amount for its running costs (management expenses) which will be consulted on in January 2022.
It is important to note that of the £900m funding that is currently forecast for 2022/23, approximately £400m relates to compensation costs for failures that have not yet occurred. This element of the forecast is based on a number of sources of information and has been calculated on an estimation of when businesses will fail.
Given the variables, these failure predictions cannot be 100% certain. To illustrate, a 20% movement in compensation costs – either up or down – would result in a £90m movement in the levy.
More information on the current assumptions behind the 2022/23 levy forecast can be found on the Outlook website page.
Caroline Rainbird, Chief Executive of FSCS, said:
"While the lower levy forecast for this year (2021/22) may be seen as good news, it is important to note that the reduction is mainly due to failures that were expected this year now looking likely to happen next year or beyond. We hope that the industry finds our early 2022/23 levy forecast helpful to plan for the year ahead. We will continue to keep the industry updated on our assumptions and latest forecasts as events play out.
"We appreciate that the levy remains high, but it will take action from all parties to drive fundamental change. We are already seeing progress, for example with the launch of the FCA’s Consumer Investment strategy. We will continue to play our role, but again we want to highlight the importance of the wider industry in playing its part. It must proactively call out, and take action against, poor behaviour and do more to identify sources of consumer detriment and practical solutions. It is only through serious action and collaboration that we can combat the issue of the rising levy."
Outlook, which includes a breakdown of the latest levy forecast for each PRA and FCA funding class, is available on the FSCS website.
Max Kelly | e: FSCSPressOffice@hanovercomms.com m: 07590 120533
Notes to editors
FSCS is the UK's financial compensation scheme that protects customers of authorised financial services firms if they fail or have stopped trading. FSCS protects:
- Deposits held in banks, building societies and credit unions
- Debt management
- Mortgage advice
FSCS is independent and can pay compensation if an authorised firm fails and is unable to pay back money it owes its customers. FSCS’s service is completely free to use and is funded by the financial services industry.